Hold Clean Science and Technology Ltd For Target Rs.745 by Prabhudas Liladhar Capital Ltd
Strategic partnership to accelerate HALS growth
Clean Science and Technology reported revenue of INR2.7bn in Q1FY27, up 10.5% YoY and 7.7% QoQ, driven by higher realisations and higher contribution from the HALS business. The HALS segment delivered volumes of ~1,000tn during the quarter. Product mix improved towards higher-grade HALS, resulting in average realizations increasing to INR550/kg from INR440/kg, while exports now account for 50% of HALS sales. Management guided of INR2.5–3.0bn in HALS revenue. The company also announced a strategic collaboration with Geneus, which is expected to contribute INR3.0–3.5bn in cumulative revenue over the next four years. In addition, Clean Science signed a five-year strategic supply agreement with Kemin Industries, with capex for this project expected to be announced shortly.
On capex front, commercialization of the Performance Chemicals-II project has been deferred to Nov’26 due to manpower shortages. While the upcoming capacity additions, coupled with the ramp-up in HALS and new strategic partnerships, are expected to support medium-term growth, we remain cautious given the uncertain macroeconomic environment and continued pressure on realizations in certain legacy products. At the current market price, the stock trades at 22x FY28E EPS. We maintain our HOLD rating with a target price of INR745, based on 22x FY28E EPS.
Revenue increases by 11%YoY/8%QoQ:
Consolidated revenue stood at INR2.7bn, 10.5% YoY/7.7% QoQ (PLe: INR 2.5 bn, Consensus: INR 2.6bn) actual revenue was 9.5% higher than our estimate driven by higher realisations and higher contribution from the HALS. Gross profit margin was at 60.9% (vs 65.5% in Q1FY26 and 63.5% in Q4FY26), margin contracted by 260bps QoQ due to increase in raw material cost. Gross profit increased by 2.8% YoY, and 3.4% QoQ.
EBITDAM contracted by 520bps YoY:
EBITDA stood at INR964mn, -3.4% YoY/ 0.7% QoQ (PLe: INR 805mn, Consensus: INR 877mn), EBITDA margin came at 35.9%, declined by 520bps YoY, and 250bps QoQ (vs 41.1% Q1FY26 and 38.4% in Q4FY26). Reported PAT stood at INR 734mn, up 4.7% YoY and 25.9% QoQ, primarily driven by higher other income. PAT margin stood at 27%, compared with 29% in Q1FY26 and 23% in Q4FY26
Concall takeaways:
(1) Domestic and Export mix: 65% 35%. (
2) Hydroquinone and Catéchol plant are ramping up, commercial supply from Aug-Sep’26.
(3) Commercial production for the Geneus project is expected to begin in Q3FY27, with Clean Science manufacturing the product using Geneus' technology.
(4) The product will be cobranded by Geneus and Clean in next 4 years total revenue is expected to INR3-3.5bn, HALS 2020 is used as a key starting material.
(5) Capex for Geneus will be ~INR250mn.
(6) Clean signs 5-year strategic supply agreement with Kemin industries, new capacity will be required for this product.
(7) Top products concentration declines from 85% in Q1FY23 to 60% in Q1FY27.
(8) Hals Blended realization improved to INR550/kg versus INR440/kg.
(9) Product mix changing from 770 (50% contribution in Q4FY26, now 35% contribution in Q1FY27 to higher grades.
(10) HALs revenue is expected to be INR2.5-3bn in FY27.
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SEBI Registration number is INH000000933
